Argentina to launch delayed offshore auction in October

Buenos Aires —
Argentina plans to launch a delayed offshore licensing round in October as it seeks to explore a large frontier region in the South Atlantic for potential oil and natural gas production growth in the future, a source in the Energy Secretariat said Wednesday.

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"It will be launched in October," the source said on condition of anonymity, citing department policy. The source said the country's energy secretary, Javier Iguacel, told oil executives of the date this week at a lunch in Houston.

Iguacel traveled to Houston Monday and Tuesday to drum up investment, with a focus on Vaca Muerta, one of the world's biggest shale plays. The development of the play by majors like Chevron, ExxonMobil and Shell, as well as local companies, is leading a recovery in oil and gas production from recent lows, bolstering expectations of self sufficiency and a surge in exports.

To sustain production growth over the longer term, however, the government wants to explore offshore.

The first of what is expected to be a series of rounds is to be for as many as 38 blocks in three basins on the continental shelf and slope, in water depths ranging from less than 100 meters to 4,000 meters.

FIRST ROUND IN YEARS

This will be the first big exploration effort in Argentina since 1991, with only sporadic attempts since.

In a June interview, Rodrigo Garcia Berro, an adviser to the Energy Secretariat who is spearheading the auction, said he thinks explorers will bid because there is so little known about the offshore acreage.

Argentina's economic problems -- and a lack of rounds -- kept explorers out of the waters during a boom in offshore drilling around the world since 2000.

Argentina's only offshore region in production is off the coast of Tierra del Fuego, the source of about 20% of the country's gas.

The rest is largely virgin, and at least two dozen companies have stepped forward to express interest, including US-based Anadarko Petroleum, ConocoPhillips and Hunt Oil, as well as Italy's ENI and Ireland's Tullow Oil, Scotland's Cairn Energy and Australia's Woodside Energy. Norway's Equinor and the big international players already in Vaca Muerta also have taken part in talks to prepare for the round.

DELAYED, BUT NOT HALTED

The round is coming three months later than previously expected and this has raised concerns about why.

The government hasn't mentioned any specific reasons, but most analysts say it's probably because of a change in leadership. Iguacel was appointed in June after his predecessor, Juan Jose Aranguren, was fired, meaning there may have been delays.

But the economy has tanked on a weakening exchange rate since then, surging inflation and some of the world's highest interest rates, sparking concerns that the round might get shelved as investor interest wanes.

Juan Cruz Diaz, managing director of Cefeidas Group, an international advisory firm in Buenos Aires, said the crisis "has spooked" companies in many sectors about making decisions on new investments.

But that doesn't seem to be the case for the offshore round, he added.

"The consultations have not stopped, nor the interest," Diaz said, "but the companies want to know what is happening and if the government is going to change its policies or not. My sense is that there are not going to be any policy changes."